Despite losing out on a key federal grant, Kansas City is pushing ahead with plans for its $100 million downtown streetcar line.

On Thursday, the City Council shifted $2 million designated for other purposes to keep the project from stalling out.

The largest chunk, $1.3 million for engineering work, comes from surpluses of three tax increment financing projects in or near downtown. An additional $750,000 is coming from the bus system, with much of that going to pay for the establishment of a downtown transportation taxing district yet to be approved by voters.

“It’s a critical aspect to keep the project moving forward,” assistant city manager Sherri McIntyre said of the engineering work at the council’s transportation committee meeting before the full council vote.

More than $1 million has already been spent on planning and engineering, she said in an interview afterward.

City officials learned in May that they would not be getting a $25 million federal stimulus grant. But they are hopeful about receiving $17.7 million from two other transportation grant programs through the Mid-America Regional Council.

And what happens if that too proves unsuccessful, Councilman Jermaine Reed asked.

“We’ll be scrambling to find other federal funds,” McIntyre said.

The city’s chances of success can only improve if Kansas City shows its own financial commitment, Councilman Dick Davis said.

That is why he and others are hoping that a majority of the 555 voters eligible to cast ballots in a mail-in election will approve the establishment of a transportation development district. Ballots are due at the end of July.

Once established, a second election would need to be held as early as this fall to set sales and property tax increases.

“We’ve got to start somewhere,” Councilman Jim Glover said of the two-mile route from the River Market to Crown Center.

The money being shifted from the public transportation fund will come from reserves and won’t affect the bus system negatively, McIntyre told the council’s finance committee on Wednesday. A little more than half of it — $375,000 — will go to cover costs of setting up the district. Some of those bills have already been incurred, such as legal fees and the cost of printing, mailing and public notices.

The rest of it will go to hire a transit consultant, study current bus routes and pay the city’s share of a campaign to build public support for public transit.

Besides being the spine of what could become a citywide rail transit system, Glover said, the proposed streetcar starter line is key to the commuter rail line that County Executive Mike Sanders envisions.

“If we don’t build it, they can’t build their system,” Glover said.

The two would probably connect in the River Market or Union Station, though the latter is less likely because of a tight squeeze in the rail trench east of there.

The county has two rail corridor studies going, one of which is set to be completed this summer, county spokesman Dan Ferguson said.